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TITLE 26-INTERNAL REVENUE CODE Other terms relating to capital losses, see section 1222 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 165, 221, 535, 1212, 1222, 1231 of this title. § 1212. Capital loss carrybacks and carryovers (a) Corporations (1) In general If a corporation has a net capital loss for any taxable year (hereinafter in this para- graph referred to as the "loss year"), the amount thereof shall be- (A) a capital loss carryback to each of the 3 taxable years preceding the loss year, but only to the extent- (i) such loss is not attributable to a for. eign expropriation capital loss, and (ii) the carryback of such loss does not increase or produce a net operating loss (as defined in section 172(c)) for the tax- able year to which it is being carried back; and (B) except as provided in subparagraph (C), a capital loss carryover to each of the 5 taxable years succeeding the loss year; and (C) a capital loss carryover- (1) in the case of a regulated investment company (as defined in section 851) to each of the 8 taxable years succeeding the loss year, and (it) to the extent such loss is attribut- able to a foreign expropriation capital loss, to each of the 10 taxable years ex- ceeding the loss year. and shall be treated as a short-term capital loss in each such taxable year. The entire amount of the net capital loss for any taxable year shall be carried to the earliest of the tax- able years to which such loss may be carried, and the portion of such loss which shall be carried to each of the other taxable years to which such loss may be carried shall be the excess, if any, of such loss over the total of the capital gain net income for each of the prior taxable years to which such loss may be carried. For purposes of the preceding sen- tence, the capital gain net income for any such prior taxable year shall be computed without regard to the net capital loss for the loss year or for any taxable year thereafter. In the case of any net capital loss which cannot be carried back in full to a preceding taxable year by reason of clause (ii) of sub- paragraph (A), the capital gain net income for such prior taxable year shall in no case be treated as greater than the amount of such loss which can be carried back to such preced- ing taxable year upon the application of such clause (ii). (2) Definitions and special rules (A) Foreign expropriation capital loss defined For purposes of this subsection, the term "foreign expropriation capital loss" means, for any taxable year, the sum of the losses taken into account in computing the net capital loss for such year which are- (i) losses sustained directly by reason of the expropriation, intervention, seizure, or similar taking of property by the gov- ernment of any foreign country, any po- litical subdivision thereof, or any agency or instrumentality of the foregoing, or (it) losses (treated under section 165(g)(1) as losses from the sale or ex- change of capital assets) from securities which become worthless by reason of the expropriation, intervention, seizure, or similar taking of property by the govern- ment of any foreign country, any political subdivision thereof, or any agency or in- strumentality of the foregoing. (B) Portion of loss attributable to foreign expro- priation capital loss For purposes of paragraph (1), the por- tion of any net capital loss for any taxable year attributable to a foreign expropriation capital loss is the amount of the foreign ex- propriation capital loss for such year (but not in excess of the net capital loss for such year). (C) Priority of application For purposes of paragraph (1), if a por- tion of a net capital loss for any taxable year is attributable to a foreign expropri- ation capital loss, such portion shall be con- sidered to be a separate net capital loss for such year to be applied after the other por- tion of such net capital loss. (3) Electing small business corporations Paragraph (1)(A) shall not apply to the net capital loss of a corporation for any taxable year for which it is an electing small business corporation under subchapter S, and a net capital loss of a corporation (for a year for which it is not such an electing small business corporation) shall not be carried back under paragraph (1)(A) to a taxable year for which it is an electing small business corporation. (4) Special rules on carrybacks A net capital loss of a corporation shall not be carried back under paragraph (1)(A) to a taxable year- (A) for which it is a foreign personal hold- ing company (as defined in section 552); (B) for which it is a regulated investment company (as defined in section 851); (C) for which it is a real estate investment trust (as defined in section 856); or (D) for which an election made by it under section 1247 is applicable (relating to election by foreign investment companies to distribute income currently). (b) Other taxpayers (1) In general If a taxpayer other than a corporation has a net capital loss for any taxable year- (A) the excess of the net short-term cap- ital loss over the net long-term capital gain for such year shall be a short-term capital loss in the succeeding taxable year, and (B) the excess of the net long-term capital loss over the net short-term capital gain for such year shall be a long-term capital loss in the succeeding taxable year. (2) Special rules (A) For purposes of determining the excess referred to in paragraph (1)(A), an 71-999 0 - 78 - 45 (Vol. 7) Page 677 § 1212